Google: Don't Brush Off Antitrust Concerns

Posted by: Stephen Wildstrom on May 05, 2009

It’s time for Google to be very careful not to make the same mistake Microsoft made in the 1990s. Microsoft failed to understand that its growing market power would draw the serious interest of federal antitrusters. It didn’t get really serious until the day it was found guilty of civil antitrust violations. In the end, Microsoft escaped serious penalties when the young Bush Administration settled on easy terms, but the ordeal cost Microsoft years of momentum—and it is still paying the price.

Now it’s Google’s turn. In the last couple of months, Google has attracted antitrust interest on three fronts. Public objections by the government derailed a proposed search deal with Yahoo!. The Justice Dept. is looking into Google’s proposed Book Search settlement with authors and publishers. And the Federal Trade Commission is looking into the relationship between Google and Apple.

Where there is this much smoke, there will sooner or later be fire. And Google would do well to make sure that when the feds come poking around, the find the company on the right side of the law. This will inevitably require some reining in of Google's free-wheeling culture--more power for the lawyers, new compliance regimes, and all the other prices you pay for becoming big and dominant.

The most important thing Google should do right away is get CEO Eric Schmidt disentangled from Apple. To put it bluntly, Schmidt has no business continuing to serve on Apple's board. Apple and Google necessarily have a complex business relationship as partners and competitors. Google is an important supplier of technology to Apple, particularly for the iPhone. And phones built on Google's Android software compete directly with the iPhone. This is an untenable solution and will only get worse as new Android phones come to market.

The fact that this does not seem obvious to Schmidt is a sign that Google is not taking its potential antitrust liabilities anywhere near seriously enough. As Microsoft (and IBM before them) learned, when you get mired in an antitrust case, you lose even if you win. Google does not want to go there.

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Reader Comments

Kevin B

May 6, 2009 12:24 AM

Velcome to Amerika.

g

May 6, 2009 05:44 AM

dg

Tom Foremski

May 6, 2009 01:32 PM

Google doesn't make money from Android. It just wants a platform on which it can run search and its other services. And as for the rest of its business, it is not against anti-trust to be successful. MSFT engaged in illegal business practices which violated anti-trust laws. There is nothing like that happening with Google. There is absolutely nothing to base an ant-trust case on. Schmidt serving on Apple's board? Please. This article is grasping at straws.

gerrrg

May 6, 2009 07:03 PM

Hmm. As I see it, Google's Android initiative should counterbalance antitrust concerns of their cooperative ties with Apple. And I still don't get why they would focus on Google instead of Microsoft, whose dominant position on OS and productivity suites far exceeds that of Google's search market. It's as if the antitrust lawyers are listening to someone whispering in their collective ears. Apple is still in an exceedingly minority position in the OS and browser market; I'm not sure why the Justice Department would investigate the tie between Apple and Google. What's the angle of antitrust?

Steve Wildstrom

May 7, 2009 10:37 AM

It's not illegal to have a monopoly, provided you achieved it through legal means. And there's no evidence that Google achieved its position illegally. However, once you have a monopoly position, the law imposes additional constraints on your behavior to prevent abuse.

As for what might constitute a violate, there;s the Clayton Act, Title 15 U.S. Code, Sec. 19:

(1) No person shall, at the same time, serve as a director or officer in any two corporations (other than banks, banking associations, and trust companies) that are—
(A) engaged in whole or in part in commerce; and
(B) by virtue of their business and location of operation, competitors, so that the elimination of competition by agreement between them would constitute a violation of any of the antitrust laws.

This section is subject to some complicated conditions and has been rarely enforced, but it's plenty for the FTC to hang an investigation on.

By the way, the fact that Google does not charge license fees for Android does not mean they don't (potentially) make money from it. Google is a business, not a charity, and they have lots of ways to monetize Android.

fruity

May 31, 2009 02:36 PM

You know this is a really interesting contrast. Everyone is up Googles back when they dont charge you a nickel. Meanwhile, no journalist dares speak of the Ebay monopoly with Paypal and all the classifieds, payment gateways, sites they've gobbled up. Y'all worried about Google? Think about all that data ebay inc has collected, their "scoring", their partnerships with sharing info with the banks. You think google is a problem? Think about everything you ever bought online being sliced and diced into a financial profile

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BusinessWeek writers Peter Burrows, Cliff Edwards, Olga Kharif, Aaron Ricadela, Douglas MacMillan, and Spencer Ante dig behind the headlines to analyze what’s really happening throughout the world of technology. One of the first mainstream media tech blogs, Tech Beat covers everything from tech bellwethers like Apple, Google, and Intel and emerging new leaders such as Facebook to new technologies, trends, and controversies.